(Dry bulk shipping item updated with further commentary on the dry-bulk sector and to reflect closing shipping stock prices)NEW YORK ( TheStreet) -- Shares of Baltic Trading ( BALT), the latest seafaring venture formed by Peter Georgiopolous -- founder of both Genco Shipping & Trading ( GNK) and General Maritime ( GMR) -- priced at the low end of its projected initial-public offering range, and promptly fell below even that disappointing mark when trading began in the name on Wednesday. Baltic's shares closed their debut session on the New York Stock Exchange at $13.96 after pricing at $14. Underwriters, led by bankers at Morgan Stanley ( MS) and Dahlman Rose, had projected a range of $14 to $16 a share. The company sold, as expected, 16.3 million shares and raised $228.2 million. There was no word on overallotment. Analysts noted that Baltic priced almost exactly at its net asset value -- or, rather, its soon-to-be NAV. The company doesn't have any floating assets yet; it will take delivery of five newly built vessels in April and one in October, using proceeds from the IPO to pay for the ships. Other dry bulk companies are trading at more than double NAV: Shares of Baltic's parent, Genco, are trading at 177%, one analyst said, while Excel Maritime ( EXM) shares are at 163%. Baltic's business model is to attach all of its vessels to the spot-market, as opposed to fixing its fleet into the long-term charters that merchant shipping companies typically prefer when business isn't so hot, because those contracts guarantee stable cash flow.
When it went public in 2005, DryShips ( DRYS) had a similar spot-only mantra, but Baltic differs in that it will strive to keep its balance sheet free of debt. The timing of the Baltic IPO has surprised some industry observers, since it comes at a moment when spot rates remain highly susceptible to a shaky global economic recovery as well as widely feared increase in ship supply, with hundreds of newly built vessels slated to hit the market over the next two years. "I think the timing of Baltic Trading's launch (and also their strategy) is ballsy," said Jeffrey Landsberg, a longtime dry-bulk pro, in an email. (He now runs his own shipping consultancy, Commodore Research.) When shipping companies expose more of their ships to spot, it generally means that they're bullish on the direction of freight rates. Baltic's management (read: Georgiopoulos) must therefore believe that its competitors in the spot market are underestimating demand for cargoes -- especially from China -- over the short- and medium-term, Landsberg added. Baltic's debut may represent the prow of another armada of shipping IPOs. An oil tanker venture, Crude Carriers, is also scheduled to price this week; Wednesday had been the expected date for initial trading. Another shipping company, Italy's Scorpio, has also recently filed a preliminary prospectus with the Securities and Exchange Commission to sell shares in a small three-ship fleet of chemical tankers, to be called Scorpio Tankers.
Shipping industry chatter has it that a handful of other ship owners, based mostly in Europe, are preparing documents for U.S. equity listings, hoping to raise cash so they can buy ships and take advantage of the still-depressed prices of cargo vessels. Despite the much-discussed prospect of a coming glut of newbuildings, ship values have been increasing of late. Last week, a capesize vessel built in 2004 sold for $62 million, 10% more than the amount fetched by a 2005 capesize just a month earlier. Those prices are still far below the peak values reached at the height of the boom, at the end of 2007. Because ship owners are still having trouble obtaining debt financing from banks -- and if they believe global economic recovery is real -- than the equity markets may represent their only option to bankroll fleet expansion. -- Written by Scott Eden in New York